Minding the millennial insurance gap

There are plenty of reasons for millennials to not buy life insurance.

Any savings that don’t go toward paying off student debt may be reserved for a down payment on an unaffordable home. And that house purchase, along with marriage and children—the most common triggers for buying life insurance—is coming later.

“If I’m 30 years old, I’m not married, I don’t have children and I’m renting, what do I need life insurance for?” says Matthew Lawrence, senior director at PwC’s insurance consulting practice in Toronto.

Or, as Sarah Brown, who handles client relations at Al G. Brown and Associates in Toronto, puts it: “People think they’re invincible when they’re 30.”

There’s also the process. Buying life insurance can seem like a labyrinth of forms and vials to those accustomed to buying everything online using platforms designed for minimal friction.

For advisors, there are reasons to not even bother trying. The wealth management industry has shifted its focus to high-net-worth clients, who tend to be older, ignoring the younger segment where the cost of acquisition may be too high, Lawrence says.

“If I have a 25-year-old male who buys a term life policy, it’s a $20-a-month premium,” he says. “It’s just not a lucrative segment for the traditional advisor.”

It’s all leading to an under-insured younger generation. A 2014 report from financial services research company LIMRA found almost half (45%) of Canadian households were under-insured, including 52% of millennials. The study, whose findings are still considered relevant in the industry, pegged the sales potential for Canada’s under-insured life insurance market at $1.6 trillion.

“The onus is on the financial services industry to find ways to effectively reach out to these consumers to help them understand their financial vulnerability if someone were to die, as well as how life insurance can fit into their overall financial plans,” the report said.

Companies are experimenting with new platforms and products to do just that.

Underwriting changes

Insurers are getting better at leveraging data to understand risk. Medical tests can cost hundreds of dollars, so companies are beginning to cut those costs and expand their risk tolerance, says Byren Innes, senior adviser to PwC.

This has led to firms offering term life policies up to $1 million without medical testing, and with a streamlined sale process.

Last year, National Bank Insurance (NBI) partnered with Montreal-based insurtech company Breathe Life to provide an omnichannel purchase path. The platform provides a quote for term products up to $750,000 based on a prospect’s age and smoking history, says NBI director Benoît Maréchal. A simplified medical application follows, which can be filled out online, by phone or in person with an advisor. The whole process from quote to sale can be completed in 10 to 15 minutes.

Lawrence says the market is slowly shifting to more direct digital sales, which currently account for less than 2% of the industry’s overall sales. That means being prepared to serve clients in multiple ways.

Younger people are accustomed to online research. This means the products themselves must be easy to understand, and firms should be prepared for sales that start online, outside of business hours, and may require a salesperson at some point. “The combination of advisor and technology is really important here,” Innes says.

Great-West Life (GWL) introduced its SimpleProtect platform for 10- and 20-year term products earlier this year. The advisor-led process—in person or by phone, not online—takes about 10 to 15 minutes, says John McCabe, regional vice-president of Freedom 55 Financial in Toronto, compared to 20 or 30 minutes for the paper version. The application was whittled down to 15 questions from more than 50.

The platform was developed based on demand for a digital interface from younger consumers, he says. “I had advisors that would come to me and say, ‘I can’t put a 50-page or 30-page application in front of a client. The young people will say, ‘This is archaic.’”

What’s in it for me?

Ian Jeffrey, Breathe Life’s co-founder and CEO, says he started the company to make it easier for advisors to reach underserved markets. Advisors often lose money on younger people, he says.

NBI has a team of roughly five salaried advisors selling term products on the platform, so commissions aren’t part of the equation.

But McCabe says advisors appreciate the new GWL platform’s speed, which makes it easier to justify the time spent on transactions where they only make $300 or $400.

Brown says that while serving clients who can only spend $500 a year on a premium is a challenge, that’s how some existing clients started.

“Can we afford to service those types of clients?” she says. “You have to be able to pay your bills. But if you want a future, you also have to be willing to invest in people who are starting out.”